ANC picks the wrong option on mining again
It is no surprise to find that resource nationalism has just been identified by international accounting heavyweight Ernst and Young as "the number one risk for mining and metals companies around the world" (see here). A number of international ratings agencies have recently highlighted the same concerns.
When will the ruling party start to acknowledge the evidence and start picking the right options?
Ernst and Young's 'Business risks facing mining and metals 2012/13' report attributes the global risk to an ‘expanded footprint' of resource nationalism, which often includes a complex web of government interventions such as mandated beneficiation, the banning of exports of unprocessed raw materials, limits on foreign ownership and super-taxes on large profits. These are the very things that the ANC has endorsed on the back of its ‘State intervention in the minerals sector' (SIMS) document released in January.
When there is a policy decision to be made in the mining sector, the ANC can reliably be expected to choose the wrong option. Despite optimistic reports to the contrary, the ruling party has not yet definitively decided to drop mine nationalisation in favour of its slightly less evil twin, a combination of a mineral resource rent tax and expanded state mining company. This follows the ANC's record of doing everything most guaranteed to shrink South Africa's mining sector with the concurrent loss of government revenue and, most importantly, jobs.
Over the past ten years, both the Mineral and Petroleum Resources Development Act (MPRDA) and Mining Charter have had a significant impact on the South African mining industry. These regulatory frameworks have no doubt contributed to the fact that South Africa's mining output in February was the lowest in 50 years, and that the industry lost 179,000 jobs between 2001 and 2011.